IN THE HIGH COURT OF DELHI AT NEW DELHI 
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  07.12.2010 
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 Present:       Mr. N.P. Sahini, Adv. for the appellant. 
 Mr. S.K. Aggarwal, Adv. for the respondent. 
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 +ITA No.1924/2010 
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 This appeal concerns the assessment year 2004-05.  In the return 
 filed by the assessee, it had claimed certain expenses allowable as business 
 expenditure.  The Assessing Officer (AO) was of the view that out of those 
 expenses to the tune of `41,95,719 related to the prior period and did not 
 pertain to financial year 2003-04 relevant to assessment year 2004-05, as the 
 assessee company was following mercantile system of accounting and therefore, 
 the said expenses should have been claimed in the previous year as they.  The 
 CIT(A) confirmed this view of the AO.  However, in further appeal preferred by 
 the assessee before the Income Tax Appellate Tribunal (?the Tribunal? in short), 
 the Tribunal has reversed the order of the AO as well as CIT (A) and allowed 
 those expenses. 
 We may point out at this stage that even when the assessee is 
 following the mercantile system of accounting, the explanation furnished by the 
 assessee before the AO and CIT(A), which was reiterated before the Tribunal was 
 that the expenses were not booked due to non-receipt of details, information 
 thereof on time, which was beyond the control of the assessee.  It was also 
 explained that the aforesaid expenses to the tune of `41.95 lacs were marginal 
 as compared to enormous size of the assessee company.  It was also explained 
 that as per the accounting policy followed by the assessee, such expenses are 
 booked in the year in which they are settled for payment.  The Tribunal went 
 into details of each and every such expense and recorded the finding of fact 
 that all these expenses were settled during this year.  It was also recorded 
 that more than 50% of expenses could be claimed only on actual expenses, as they 
 were covered under Section 43B(d) of the Act.  Detailed discussion in this 
 behalf is contained in Para 8 of the order of the Tribunal, which reads as 
 under: 
 ?We have heard the rival contentions and perused the facts of the case.  The 
 learned counsel for the assessee Shri S.K. Aggarwal has submitted a chart at 
 Pages 1 to 4 along with various evidence at Page 6 and onwards of the paper book 
 with regard to the explanation that the said prior period expenses have been 
 settled during the year relevant to the assessment year.  In the Fibers Division 
 interest paid to M/s Kapila Colours Pvt. Ltd. the payment was settled on 
 11.06.2003 for which relevant evidence are available on paper book pages 5 to 10 
 which were available before both the authorities below, repair of turbocharger, 
 the bills were settled on 16.08.2003 and the relevant evidence are available at 
 PB Pages 11 to 14, interest paid to M/s Poddar Pigments Ltd., Bombay, the 
 account has been settled on 3.11.2003 and evidences are available at PB Pages 15 
 to 18.  Similarly foreign tour expense of Managing Director of Rs.7,856/- have 
 been settled during the year.  As regards interest paid to LIC on debenture 
 amounting to Rs.20,98,130 and Rs.40,342/- the relevant evidences for payment 
 during the year are available at PB Pages 19 to 26.  Moreover, the said payments 
 are allowable deduction under section 43B(d) of the Act and on payment basis and 
 the same cannot be disallowed under any circumstances.  As regards Excise Duty 
 adjustable account of Rs.5 lacs the relevant evidences are available at PB Pages 
 27 to 30 and it was explained that the company availed the MODVAT credit on High 
 Speed Diesel consumed up to 26.04.1998 which was disallowed by the Excise 
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 Department and the same was paid and the amount was paid against the said demand 
 on 10.05.1999. 
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 The amount was wrongly debited to the Excise Duty adjustable account instead of 
 power and fuel account and it was rectified during the year.  The learned 
 counsel for the assessee further argued that the expenses settled during the 
 year in Chemical Division amounting to Rs.10,97,676/- also pertain to the 
 preceding year but settled during the year.  Moreover, the assessee company had 
 adopted the consistent system of accounting for such expenses consistently 
 incurred in the preceding years.  Attention was invited to PB pages 59 and 
 onwards where for the assessment year 1987-88 and onwards the department had 
 been allowing such claim.  During the assessment year 2002-03, the department 
 disallowed the claim of the assessee even being consistently followed by the 
 assessee.  The learned counsel for the assessee invited our attention to the 
 decision of ITAT Delhi Bench ?C? in the case of Goetze (India) Ltd. vs. DCIT 
 (2008) 115 ITD 119 where in Para 22 on the identical issue the claim of the 
 assessee in that case had been allowed by the Tribunal.  The learned counsel for 
 the assessee distinguished the decisions relied upon by the learned CIT(A) since 
 the expenses and it quantum was not known in the present case as in the cases 
 relied upon by the CIT(A).  The facts in the present case are quite different 
 and distinguishable to the facts in the case relied upon by the learned CIT(A). 
 The learned DR Shri G.S. Sahota on the other hand, relied upon the order of the 
 authorities below.? 
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 That apart, specific query was put to the learned counsel for the 
 appellant that whether the return filed in the earlier assessment year showed 
 profit or loss insofar as the assessee company is concerned.  Learned counsel 
 for the appellant was not in a position to answer to this.  Learned counsel for 
 the respondent informed that even in earlier year, the assessee had shown 
 positive income and paid tax thereon.  If that is the situation, in any case, 
 there is no loss of the revenue.  Had this expense been allowed in the previous 
 year, the assessee would have paid lesser tax.  On this ground also, we do not 
 find it to be a fit case to interfere with the order of the Tribunal. 
 This appeal is accordingly dismissed. 
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 A.K. SIKRI, J. 
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 INDERMEET KAUR, J. 
 DECEMBER 07, 2010 
 pmc 
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